You probably guess what is at stake when one speaks about international money transfer. Indeed the expression is pretty obvious. However it is a bit more complicated than just wiring money from 2 banks accounts located in different countries. Here is a short article that will give you a bigger picture.
What is behind international money transfer?
Basically we talk about international money transfer when foreign currencies are exchanged. Most of the time it happens through a wire transfer between two banks. The World Bank estimates that each year around $600 billion are sent worldwide as remittances. They are mainly sent by expats, foreign students (or their parents) and migrant workers.
To get back to the transfer itself: what happens is that a certain amount of US dollar for example is sent to Mexico. This means that this amount as to be converted into Mexican pesos. This conversion is defined by the exchange rate. For example 1 USD = 20,64 MXN. This equation means that for 1 US dollar you can get 20,64 MXN. However this amount can vary as exchange rates are defined by the foreign exchange market which fluctuates depending on the market demand. Therefore, it means that some days are better than others to make an international money transfer, depending on the value of the exchange rate.
How to make an international money transfer?
Now that you have understood the importance of the exchange rate when making an international money transfer, let see what are your options.
Let’s say that you are a French student living in San Francisco for a year. Your parents have to send you money each month to pay for your day-to-day life. You have open a bank account in a local bank as it will cost you too much to use your French debit card. However, you should tell your parents not to send you money through a wire transfer from their French bank to your US account. Indeed, you’ll get a very bad surprise if you do so: the fees generally applied by banks are extremely high. Moreover they apply a poorer exchange rate than the real one and keep the difference for themselves.
Today there are more and more options to make international money transfer and the cheapest ones are probably online operators. Indeed, they charge you around 3 to 5% of the amount sent, whereas banks will charge you around 10%. One thing you should get used to do is to compare the solutions before making your international money transfer.